California Water Subsidies

Large agribusiness operations - not small family farmers - are reaping a windfall from taxpayer-subsidized cheap water

Executive Summary

Taxpayers Guarantee Central Valley Farms Water Through a Subsidy Worth Up to $416 Million per Year

At a time when California water is scarce and expensive, taxpayers guarantee Central Valley farms an abundant and cheap supply through a subsidy worth up to $416 million a year, according to an Environmental Working Group (EWG) investigation that calculated, for the first time, federal water subsidies to each of more than 6,800 farms in the Central Valley Project (CVP).

The study, which comes as the U.S. Bureau of Reclamation is negotiating new long-term contracts with CVP farmers, is the first to name individual recipients of federal water subsidies in California. It confirms that large agribusiness operations — not the small family farmers federal water projects were intended to benefit — are reaping a windfall from taxpayer-subsidized cheap water.

EWG found that water subsidies in the CVP are overwhelmingly controlled by the largest farms. In 2002, the largest 10 percent of the farms got 67 percent of the water, for an average subsidy worth up to $349,000 each at market rates for replacement water. Twenty-seven large farms received subsidies each worth $1 million or more at market rates, compared to a median subsidy for all recipients of $7,076. One farm — Woolf Enterprises of Huron, Fresno County — received more water by itself than 70 CVP water user districts, for a subsidy worth up to $4.2 million at market rates.

CVP farmers get about one-fifth of all the water used in California, at rates that by any measure are far below market value. In 2002, the average price for irrigation water from the CVP was less than 2 percent what Los Angeles residents pay for drinking water, one-tenth the estimated cost of replacement water supplies, and about one-eighth what the public pays to buy its own water back to restore the San Francisco Bay and Delta.

Water districts' records of individual recipients of CVP subsidies are shielded from the public by state law. But EWG's 16-month investigation used data from the federal Bureau of Reclamation, the state Department of Water Resources and the state Department of Pesticide Regulation to answer fundamental questions that have stymied efforts at reform of the CVP: Who gets subsidized water, how much do they get, and what is each recipient's water subsidy worth?

We sought the answers because the public has a right to know where its water is going. The public, elected officials and regulatory agencies need this information in order to make informed decisions about the future use of California's most valuable natural resource. The federal Bureau of Reclamation is in the midst of negotiating new long-term contracts with CVP water recipients, and its decisions will lock up millions of acre-feet of water for the next half a century.

The original intent of federal water projects, set out in the Reclamation Act of 1902, was to encourage Western settlement by small family farms. Today, artificially cheap irrigation water in the Central Valley has led to a host of problems, including the inefficient use of water, devastation of fish and wildlife habitat and severe toxic pollution. Thousands of Californians — including Central Valley residents employed by farms whose water is subsidized — lack access to an affordable and pure supply of drinking water.

Reforms to make details of water subsidies public, limit the amount and value of water subsidies to large farms, and encourage conservation by pricing water at rates closer to market value are needed to end the disaster for taxpayers and the environment wrought by the Central Valley Project.

It's one thing to ask taxpayers to subsidize farming with cheap water. It's another thing when those subsidies top $400 million a year, and still another when the great majority of the subsidies are going to the largest, wealthiest farms. As the contracts governing these subsidies are renegotiated, it's time for an honest and fully informed debate about how the water needs of all Californians will be met in the 21st Century.